RALEIGH (June 4, 2025) – Which would you believe – a nonpartisan staff or a politician?
In February, a consensus forecast between the General Assembly’s Fiscal Research Division and the governor’s Office of State Budget and Management projected a slight increase (0.5%) in state revenues for 2025-26 – but an $823 million (2.4%) decline in revenues for 2026-27, due to scheduled reductions in state income-tax rates.1
Gov. Josh Stein warned then that the state faces a “fiscal cliff.”
With the state confronting challenges in public education, health and rebuilding Western North Carolina after Hurricane Helene, he called on state legislators not to raise taxes, but to pause tax rates at current levels.
“Just freeze it,” he said. The projected shortfall is “entirely self-inflicted.”2
Senate President Pro Tem Phil Berger, meanwhile, pooh-poohed the forecast.
“As long as the economy continues to grow, it is our belief, and my belief, that is backed by our experience over the last decade and a half, that revenue to the state will be more than adequate to address the funding requirements that we have,” he said when the Senate released its budget proposal in April.3
WELL, IT JUST got worse.
An updated forecast issued last week projected that state revenues will be $218 million lower in 2025-26 and $222 million lower in 2026-27 than the forecast in February.4
“This news comes in the midst of an uncertain economy and federal budget pressures that may put funding for critical resources including Medicaid and SNAP in jeopardy,” said Stein. “It also comes as we find ourselves on the hook for even more Hurricane Helene recovery expenses. That’s why I proposed freezing tax rates where they are.
“We need to balance our books, not bury our heads in the sand.”5
THAT’S ALSO why it’s all the more important to support the state House’s version of the 2025-27 state budget, which both slows the tax cuts and gives far more generous raises to K-12 teachers than the Senate’s miserly proposal does.6
House Democratic Leader Robert Reives, who voted for the House budget, said the revised projection “confirms our worst fears about the direction these aggressive tax cuts are taking our state.”
“The House budget, for all its faults, acknowledged the reality our state is in: We cannot afford to lose more revenue while we have billions of dollars in needs, both in Western North Carolina and across the state,” Reives said.7
Berger told reporters that the House’s budget would keep $2 billion in the state’s pockets.
“That looks to me like an attempt to renegotiate an agreed settlement,” he said. “More money out of the pockets of North Carolinians as a result of tax policy sounds like a tax increase to me.”8
That’s a semantic game – word play. Not cutting taxes is not the same thing as raising taxes.
And our state’s so-called “leaders” should know that.
1 https://www.osbm.nc.gov/consensus-revenue-forecast-fy-2025-27/open.
2 https://www.newsobserver.com/news/politics-government/article300530909.html.
3 https://www.newsobserver.com/news/politics-government/article307275096.html.
4 https://www.osbm.nc.gov/revised-consensus-revenue-forecast-may-2025/open.
5 https://governor.nc.gov/news/press-releases/2025/05/29/governor-stein-statement-revised-state-revenue-forecast.
6 https://publicedworks.org/2025/05/house-budget-shows-promise-for-teacher-pay/.
7 https://www.newsobserver.com/news/politics-government/article307275096.html.
8 https://www.wral.com/story/nc-tax-cut-debate-could-be-major-sticking-point-for-state-budget-talks/22026278/.
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